Right of Redemption and Foreclosure- Under SARFAESI Act

The right of redemption is a fundamental incident of a mortgage, preserved both in equity and under Section 60 of the Transfer of Property Act, 1882. It implies the principle that a mortgagor, on repayment of the secured debt, is entitled to reclaim the mortgaged property. This right was carried into the framework of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002), through Section 13(8), which allows a borrower to redeem secured assets by tendering the dues before the property is sold or transferred.

However, the point of extinguishment of this right has been the subject of significant controversy. Under the pre-2016 regime, courts interpreted Section 13(8) to mean that redemption could be exercised up to the actual sale, including even after auction but before registration of the sale certificate. This was affirmed by the Supreme Court in Mathew Varghese v. Amritha Kumar & Ors (2014). The 2016 amendment, however, altered the text of the sub-section (8) to restrict redemption strictly to the stage before publication of the auction notice. This change gave rise to divergent interpretations by High Courts, some continuing to apply the borrower-friendly view of Mathew Varghese, and others enforcing the stricter cut-off laid down by the amended provision.

The conflict created uncertainty for borrowers, banks, and auction purchasers. It is against this backdrop that the Supreme Court has, through recent rulings culminating in M. Rajendran v. KPK Oils (2025), settled the law by holding that under the amended Section 13(8), the borrower’s right of redemption ceases with the publication of the auction notice. This uncertainty has been resolved by the Supreme Court through its recent elaborate judgement on the issue in the case of M. Rajendran v. KPK Oils. This write up discuss the basis of the applicable doctrines and the legal jurisprudence around the right of redemption and its extinguishment under the provisions of SARFAESI Act..

Nature of the right of redemption:

The literal meaning of the term ‘redemption’ is, buying back property by paying off a loan. Right to redemption is a well-recognised right of a mortgagor under a mortgage transaction. Section 60 of the Transfer of Property Act, 1882 (TPA) codifies this right. 

Section 60 of TPA confers on the mortgagor the statutory right of redemption once the principal money has become due. This means that on payment or valid tender of the mortgage money at the proper time and place, the mortgagor can require the mortgagee to return the mortgage deed and all documents relating to the mortgaged property, to restore possession of the property if the mortgagee is in possession, and, at the mortgagor’s cost, to re-transfer the property either to him or to such third person as he may direct, or to execute and, where necessary, register an acknowledgment that the mortgagee’s rights have been extinguished. The section makes it clear that this right of redemption continues unless it has been extinguished either by an act of the parties, such as a release or foreclosure, or by a decree of a competent court.

Clogs on Redemption:

Equity views any provision that impedes redemption as void. The principle is expressed in the maxim “once a mortgage, always a mortgage”; a mortgage cannot be turned into a conveyance, any condition in a mortgage deed that hinders redemption is a clog and therefore void. English courts developed the doctrine of equity of redemption. In Santley v. Wilde (1899), the Court of Appeal upheld a stipulation giving the mortgagee a share of theatre profits for five years, observing that such collateral arrangements are permissible if they are not unconscionable or oppressive and do not make redemption illusory. In Kreglinger v. New Patagonia Meat & Cold Storage Co. (1914), the House of Lords refined the doctrine by recognising that a collateral agreement may survive redemption if it is an independent bargain, separate from the mortgage, and is not unconscionable. 

Section 60 TPA embodies this by rendering agreements that restrict redemption invalid. In its landmark judgement in the case of Seth Gangadhar v. Shankarlal (1958) the Supreme Court reiterated that the mortgagor’s right to redeem remains until it is lawfully extinguished and that any stipulation rendering a mortgage irredeemable is void. The Court declared that the principle “once a mortgage, always a mortgage” governs Indian law. In the case of Mathew Varghese v. M. Amritha Kumar (2014), it was held that the mortgagor’s right of redemption is not lost merely because the bank has taken possession. Proper notice must be given, and the sale must be conducted strictly in accordance with law; until the sale is concluded and a sale certificate issued, the mortgagor may redeem the property.

In the case of Allokam Peddabbayya v. Allahabad Bank (1997) the Supreme Court held that even after a property is sold pursuant to a decree, the mortgagor can redeem the property before the sale is confirmed. The right is extinguished only once the sale is confirmed and a sale certificate is issued.

Scope of the right:

The right of redemption arises as soon as the principal debt becomes due and continues until the mortgagor’s right is extinguished by law. It subsists even if the mortgagor is in default; the right will not be lost merely because instalments were not paid. It can be extinguished only by an act of parties (for example, the mortgagor executes a deed releasing the right, or the property is conveyed to the mortgagee free of the right), a decree of a competent court, or statutory extinguishment, e.g., where legislation abolishes the mortgagor’s rights, as in Shankar Sakharam Kenjale v. Narayan Krishna Gade (2020), where the Bombay Paragana and Kulkarni Watans (Abolition) Act vested the land in the State, thereby terminating the mortgage and the equity of redemption.

Right of Foreclosure in Mortgage Transactions:

Foreclosure is a judicial process where the mortgagee seeks a decree barring the mortgagor’s equity of redemption. A foreclosure suit must establish that the debt is due, the mortgagor has defaulted, and that the mortgage is one in respect of which foreclosure is allowed (e.g., a mortgage by conditional sale). Only when the final foreclosure decree is passed and becomes absolute does the right of redemption cease. Thus, it is a remedy available to a mortgagee in certain types of mortgages, most notably a mortgage by conditional sale or an anomalous mortgage where such a right is expressly conferred. It is the legal process by which the mortgagee seeks a court decree permanently barring the mortgagor’s right of redemption. In essence, while the right of redemption is the heart of a mortgage in favour of the borrower, foreclosure represents the counterweight in favour of the lender, enabling him to cut off redemption rights once default occurs.

A mortgagee, after the mortgage money has become due, can approach the court for a decree of foreclosure (debarring the mortgagor’s right to redeem) or for sale of the mortgaged property. A suit for foreclosure permanently bars the mortgagor’s right of redemption.

However, this right is limited:

• Only mortgagees by conditional sale or anomalous mortgagees (where terms permit foreclosure) can file for foreclosure.

• Usufructuary mortgagees cannot seek sale, and mortgagees of public utility undertakings (like railways, canals) cannot seek foreclosure or sale.

• A person holding rights in only part of the mortgage money cannot sue in respect of just a corresponding part of the property unless interests have been severed with mortgagor’s consent.

Section 68- Section 68 – Right to Sue for Mortgage Money:

A mortgagee can sue for the mortgage debt directly, but only in limited cases:

• Where the mortgagor has personally bound himself to repay, 
• Where the mortgaged property is destroyed or the security becomes insufficient without fault of the mortgagee, and the mortgagor fails to provide further security, 
• Where the mortgagee loses the security due to wrongful act or default of the mortgagor, 
• Where the mortgagee is entitled to possession, but the mortgagor wrongfully refuses to deliver or secure possession.

Section 69- – Power of Sale without Court Intervention:

In certain cases, the mortgagee can sell the mortgaged property without court involvement. These are:

• English mortgages, where neither party belongs to communities excluded (Hindus, Muslims, Buddhists, or others notified by State).
• Where the mortgagee is the Government and the deed expressly gives power of sale.
• Where the mortgage deed expressly provides power of sale and the property is situated in specified towns (Calcutta, Madras, Bombay, or notified towns/areas).

Even then, sale can only occur after, written notice of demand for repayment and a three-month default, or interest of at least INR 500 remains unpaid for three months.

In short, Section 67 gives foreclosure/sale rights through court in specified mortgage types. Section 68 allows suing for mortgage money in limited situations. Section 69 allows extra-judicial sale without court but only in restricted cases, subject to notice safeguards and accountability for misuse.

Right of Redemption under SARFAESI Act:

The right of redemption is a mortgagor’s statutory entitlement under Section 60 of the TPA. Parallelly, under Section 13(8) of the SARFAESI Act, the borrower has a right to redeem by discharging dues before the sale or transfer of secured assets. Initially, this provision allowed redemption up to the date of sale. However, the 2016 amendment narrowed this right, making it exercisable only up to the publication of the auction notice. This amendment created significant interpretational issues, as courts grappled with balancing the equitable right of redemption against the sanctity of auction sales.

Conflicting Judicial Views Prior to 2025:

The position became complicated after 2016 because different High Courts took divergent views. The Andhra Pradesh High Court in Sri. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager took the view that in accordance with the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. High Court of Telangana in the case of K.V.V. Prasad Rao Gupta v. State Bank of India held that the right of the borrower to redeem the property stands extinguished upon publication of sale notice after the expiry of thirty-days period of notice to the borrower. 

However, in a conflicting judgement, another Bench of the Telangana High Court in Concern Readymix v. Corporation Bank relied upon Section 60 of the TP Act to hold that the borrower’s right of redemption would continue to exist until the execution of the conveyance. similar view was taken by the Punjab & Haryana High Court in Pal Alloys and Metal India Private Limited & Ors. v. Allahabad Bank & Ors The court therein looked into the Report of the Joint Committee on the 2016 Amendment to arrive at the conclusion that under the amended Section 13(8) of the SARFAESI Act, the right of redemption of mortgage would continue till the execution of conveyance or issuance of sale certificate. 

This divergence created confusion and uncertainty. In some jurisdictions, borrowers could redeem until very late in the process, while in others the right ended once the auction notice was published. 

Supreme Court’s Position Before 2025:

The Supreme Court itself had given two strands of rulings. In Mathew Varghese (2014), under the old Section 13(8), it held that redemption survives until completion of sale. But in Celir LLP v. Bafna Motors (2024) interpreting the amended Section 13(8), the Court clarified that the right of redemption ceases upon publication of the auction notice. Yet, given the conflicting High Court decisions, uncertainty persisted, with Tribunals continuing to apply Mathew Varghese reasoning even in post-2016 cases. In Dwarika Prasad v. State of Uttar Pradesh the Supreme Court considered the unamended Section 13(8) of the SARFAESI Act, keeping in mind the decision in the case of Mathew Varghese and held that the right of redemption of mortgage is not lost until there is a transfer by a registered instrument. In Allokam Peddabbayya & Anr. v. Allahabad Bank & Ors similar view was taken, that the right of redemption is lost once the property is put to auction and a sale certificate is issued in lieu thereof. 

Thus, prior to the amendment of Section 13(8) of the SARFAESI Act, this Court consistently held, that the borrower shall continue to have a right of redemption of mortgage until the execution of the conveyance of the secured asset by way of a registered instrument.

Settlement of the Issue in M. Rajendran v. KPK Oils (2025):

It is to noted that on 1st September, 2016, the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Act, 2016 was enacted, which inter-alia amended sub-section 8 of Section 13 of the SARFAESI Act, and substituted the words “any time before the date fixed for sale or transfer” of the original provision with “at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets”.

In Shakeena & Anr. v. Bank of India & Ors it was clarified that as a result of the amended provision, a more stringent condition has been stipulated whereby the borrower, in order to redeem the mortgage, is now required to tender all dues to the secured creditor before the date of publication of notice for auction. But the issue again got complicated with judgement in S. Karthik and Ors. v. N. Subhash Chand Jain and Ors. reported in (2022) 10 SCC 641, where a three-Judge Bench of the Supreme Court placing reliance on Mathew Varghese (supra) once again noted that under Section 13 sub-section (8) of the SARFAESI Act, the mortgagor, i.e. the borrower, retains full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer. 

Now, the controversy appears to be set aside by the Supreme Court in its judgement in M. Rajendran & Ors. v. KPK Oils & Proteins India Pvt. Ltd. (2025) INSC 1137, where the issue has been addressed and dealt with in very comprehensive manner. This case involved a borrower seeking redemption after auction and issuance of the sale certificate. The Madras High Court had allowed redemption based on Mathew Varghese. On appeal, the Supreme Court examined the legislative history, the conflicting High Court judgments, and prior Supreme Court precedents and held that post-2016 amendment, the right of redemption ends strictly with the publication of the auction notice. It rejected distinctions based on sale completion or registration of sale certificate, emphasizing that once an auction process is initiated, third-party rights of auction purchasers must be protected. The Court expressly disapproved borrower-friendly interpretations of the AP High Court and confirmed that Bafna Motors reflects the correct legal position.

In effect, the Court harmonized the law by overruling divergent High Court decisions and clarified that borrowers have no right of redemption once the auction notice is published. The Hon’ble Court observed that “borrower has no unfettered right to tender such amount of dues, as stipulated in Section 13(8), after the date of publication of notice for public auction or inviting quotations or tender from public or private treaty, as the case may be, because the restriction on the secured creditor, from transferring the secured asset, envisaged under clause(s) (i) and (ii) of the said provision, would only be attracted, if the dues are tendered prior to the publication of notice for public auction or inviting quotations or tender from public or private treaty, as the case may be. Where the borrower tenders such dues after the publication of the notice stipulated in Section 13(8), the secured creditor is not bound to accept it, and can continue to proceed with the transfer of the secured asset, by way of lease, assignment or sale.” Further at para (113) of the judgement, the Supreme Court lay down “113. A perusal of the bare text of Section 13(8) of the SARFAESI Act suggests that the borrower can tender the entire dues of the creditor including all costs, charges and expenses “before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets”. In other words, the textual reading of the provision appears to convey that the right of redemption of the borrower would be extinguished on the date on which the notice is published for auction, invitation of quotations, tender from public or private treaty.”

Redemption under Different Modes of Sale:

The Court clarified that Section 13(8) of the SARFAESI Act read with Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 does not differentiate between the modes of transfer (auction, tender, private treaty, or lease). It expressly rejected the argument that the right of redemption is lost upon the fall of the hammer in public auction but survives in other modes of transfer. The Court held that there can be no artificial distinction: the borrower’s right of redemption continues until the date of publication of the sale notice, irrespective of the method chosen for sale. Thus, redemption gets extinguished not by the act of bidding or negotiation but once the statutory cut-off (publication of sale notice) is crossed.

Requirement of Notices:

The judgment also dealt with the controversy on whether two separate notices are required:

• One notice to the borrower, and
• Another public notice for auction/tender.

The Supreme Court settled issued and held that only one notice of sale under Rule 8(6) is required, and this suffices for all modes of transfer. The borrower cannot insist on multiple notices. The earlier contrary views of some High Courts (that demanded a separate borrower-specific and public auction notice) were expressly overruled.

Final Settlement before the court:

The Court ultimately laid down three critical propositions:

• Uniform Extinguishment Point: The right of redemption under Section 13(8) ends before the date of publication of the sale notice, regardless of whether the sale is by public auction, tender, private treaty, or lease.
• Single Notice Suffices: Rule 8(6) requires only one notice to be issued, and it serves both purposes – informing the borrower and initiating the sale process.
• Clarity Against Conflicting Precedents: Earlier High Court rulings that treated redemption differently for auction vs. private treaty, or required separate notices, were disapproved. The Supreme Court declared that the law must be uniform and consistent across all modes of sale. 

In effect, the Court reaffirmed that SARFAESI’s objective of speedy enforcement cannot be diluted by procedural uncertainties, while still preserving a fair redemption window for borrowers. This landmark judgment has thus resolved long-standing confusion by clarifying point of extinguishment of the right of redemption under SARFAEI Act, (before sale notice publication) across all modes of sale, clarifies that a single notice is enough, and displaces conflicting High Court interpretations.

This ruling has far-reaching effect, for borrowers, it underscores the need for timely action, as equity of redemption extinguishes upon publication of the auction notice. For banks and financial creditors, it provides much-needed clarity, ensuring that auction sales are not destabilized by belated redemption claims. For auction purchasers, it gives confidence that once they bid pursuant to a valid auction notice, their rights cannot be disturbed by subsequent borrower payments. For the judiciary, it resolves years of uncertainty created by divergent High Court interpretations and underscores the importance of procedural safeguards under the Rules.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.comor write to our authors:

Mukesh Chand, Senior Counsel – Email – mukeshchand@elp-in.com